On the Road to Becoming the World s Best Specialty Chemical Company

Transcription

1 On the Road to Becoming the World s Best Specialty Chemical Company Perspective & Progress November

2 Chemtura Key Facts Pro forma 2004 sales of $3.9B 6,700 employees Products & services in more than 100 countries Worldwide manufacturing, research facilities, global sales offices Headquarters Middlebury, Connecticut, USA 2

3 Constructing Opportunity Combines Strength with Strength Crompton *Strong Leadership *Operating Excellence *Price Improvement *High-Value Niche Focus A New Specialty Chemicals Bellwether Great Lakes *Leading Industry Positions *Superior Technology *Recognized Brands *Strong Balance Sheet 3

4 We Are a Global Producer and Marketer of Plastics Additives Flame Retardants & Fire Protection Products Petroleum & Lubricant Additives Urethane Polymers & Chemicals Optical Monomers Fluorine Chemicals Clear Brine Fluids Crop Protection Products EPDM and Rubber Chemicals Industrial Water Treatment Products Swimming Pool & Spa Products Household Cleaners Pro Forma 2004 Annual Sales: $3.9 Billion 4

5 Major End Markets Served Agriculture Automotive Construction Consumer Industrial 5

6 Agriculture Chemtura s Crop Protection products enhance crop quality and increase yield. Focus on high-value crops such as nuts, citrus, grapes and cotton Global distribution channels World-class seed treatment expertise 6

7 Automotive Market Chemtura s products are an integral part of many automotive components. High-performance tires Lubricants that extend engine life Plastics additives that strengthen and improve durability 7

8 Construction Our products help create construction materials that are tougher, lighter, more flexible and fire resistant. Decking and piping Vinyl siding and flooring Wire and cable coatings Commercial roofing and insulation 8

9 Consumer We make a variety of products that enhance the quality of many consumer applications. Pool and spa treatment products Household cleaners Our additives improve the safety and durability of: Recreational products Clothing, furniture & carpeting Personal care products 9

10 Industrial Our products are used in many industrial applications, including: Manufacturing Industrial water treatment Drilling/Extraction 10

11 Responsible Care Chemtura is dedicated to Responsible Care, the chemical industry's initiative to protect the environment; ensure the safety and security of its operations; and safeguard the health and safety of employees and neighboring communities. Our goal is to make continuous progress toward the vision of no accidents, injuries or harm to the environment. As active and responsible members of the communities in which we operate, Chemtura is committed to open communication with our employees and neighbors. 11

12 Being The Best Means We Strive to Be: A great place to work and have a successful career Our customers first choice for providing solutions Our shareholders best investment through consistent growth and increasing returns An enterprise that continuously improves its safety record and environmental stewardship 12

13 Clear Specialty Vision Business Model Attributes/Characteristics Serve high-value niches Differentiated product offerings Unique value in customer end use Small part of final product cost Pursue high-potential growth opportunities Favorable industry dynamics Modest capital intensity 13

14 Clear Financial Goals Gross margins Greater than 30% SGA&R Less than 11% Operating profit At least 15% margins Revenue Growth 10% per year 14

15 Global Balance Sales by Geography LATIN AMERICA 5% EUROPE 31% NORTH AMERICA 51% Based on pro forma 2004 sales ASIA/PACIFIC 13% 15

16 Diverse Business Platform Chemtura Plastic Additives Specialty Additives Polymers Crop Protection Consumer Products Other Sales $1,225.6M OP $101.9M OP Margin 8.3% Sales $441.1M OP $80.1M OP Margin 18.1% Sales $391.2M OP $76.6M OP Margin 19.6% Sales $294.7M OP $81.5M OP Margin 27.7% Sales $486.2M OP $37.8M OP Margin 7.8% Sales $135.2M OP $16.2M OP Margin 12.0% - CK Plastic Additives -GLK Polymer Stabilizers - Flame Retardants - Petroleum Additives - Rubber Additives - EPDM - Urethanes - CK Crop Protection - Fumigants (Methyl Bromide) - Pool & Spa - Household Cleaners - Fluorine Chemicals - Industrial Water Treatment - Optical Monomers 16

17 Leadership in High Potential Niches Plastics Additives Petroleum Additives (Components) Castable Urethane Pre-Polymers Total Global Sales: $10 bn Total Global Sales: $1.8 bn Total Global Sales: 160 mm lbs New Chemtura Copernicus (#1) 12% New Chemtura Copernicus (#1) 12% New Chemtura Copernicus (#1) 31% Largest global supplier of plastic additives Flame Retardants Largest component supplier to the lubricants industry Pool Chemicals Global leader in urethane specialties Crop Protection Total Global Sales: $2.1 bn Total Global Sales: $2.2 bn 2004 Operating Margins New Chemtura Copernicus (#1) 23% New Chemtura Copernicus (#1) 26% 35% 25% 15% 13% 28% 5% (5%) Industry Avg New Copernicus Chemtura Global leader in flame retardants Leading full-line pool chemical supplier Most profitable ag chem company in the world 17

18 Segment Profitability & Scale Nine Months 2005, Pro Forma Adjusted Non-GAAP (Dollars in Millions) 30.0% Operating Profit % 25.0% 20.0% 15.0% 10.0% Other Crop Protection Polymers Consumer Products Specialty Additives Plastic Additives 5.0% 0.0% Operating Profit ($ in millions) Relative size represents sales dollars 18

19 Optimizing the Combined Portfolio Core Invest to Grow Improve Profitability Run for Cash Assess Crop Protection Petroleum Additives Urethane Polymers Pool Chemicals Flame Retardants Plastics Additives Polymer Stabilizers Rubber Chemicals EPDM Methyl Bromide Industrial H 2 O Treatment Household Cleaners Fluorine Optical Monomers Urethane Additives and Baxenden Joint Venture 19

20 3Q05 Results Reveal Progress / Challenges Pro Forma Adjusted Non-GAAP Operating Profit Bridge Q304 v Q (Dollars in Millions) $ $63.2 ($46.0) ($34.0) ($13.3) $1.1 $28.7 ($7.4) $ Q3'04 Selling Price RM / Energy Volume / Mix Mfg Productivity Fx Cost Savings Other Q3'05 20

21 Chemtura Transformation Priorities Capture synergies and integration savings Rationalize portfolio: divest non-core businesses Continue business improvement across core portfolio Turnaround / profit improvement in Consumer Products and Plastic Additives Debt reduction 21

22 Synergy Savings Update $150 million total cost reduction 2005 $10 million 2006 Δ $90 million 2007 Δ $50 million Consists of organizational, procurement and numerous service cost reductions Ongoing Six Sigma and Lean manufacturing initiatives are largely incremental to these merger related synergy savings 22

23 Supply Chain Management Lean principles apply to all parts of the organization Engineering Logistics Manufacturing Strategic Sourcing Information Technology Lean thinking requires the entire organization s participation, support, and drive Finance Human Resources Legal Research and Development Sales and Marketing 23

24 Restoring Specialty Margins Pricing Calibrate Value-in-Use Product & Market Segmentation Discipline and Determination Understand value of our products in customers applications Target higher profit segments for growth Align costs with profit potential Portfolio optimization Exit low performers Consistency / transparency Target historical highs 24

25 Revealing Self Examination Customers Served and Product Portfolio 100% 95% 70% Profits Key Valuable Secondary Marginal 0% 15% 50% 100% Customers / Products 25

26 Conclusions and Actions 100% Prune Unprofitable Products Products 50% Cultivate Core Growth Re-channel Unprofitable Customers to Distributors Force Profit Improvement 0% 50% 100% Customers 26

27 Addressing Our Plastic Additives Portfolio Analyzing our markets: customers, growth, competitive set, our costs Divesting low potential lines; growing high potential lines New merged platform has high potential 27

28 Fragmented Plastics Additives Business Players 1 Size ($MM) Plastics Additives Regions IM OP FR HS L/MR SA BI PL AS AO LS US EUR A/P Chemtura 1,180 Ciba Crompton Arkema 600 2,4 Great Lakes Rohm & Haas Akzo 500 2,3 Albemarle Kaneka Baerlocher Ferro Asahi Denka Clariant Cytec Legend: Primary Participation Niche (less than $50 million) Notes: 1. Excludes commodity plasticizer players, e.g. ExxonMobil Chemical, BASF and Eastman. 2. Source Townsend Polymer Services & Information Group 12/ Flame retardants business ($166MM sales) sold to Ripplewood Holdings 8/ Arkema is new name for Atofina s Vinyl Products, Industrial Chemicals and Performance Products. 5. Source BRG Townsend Plastics Additives 2002 A Global Study. Legend IM = Impact Modifiers, OP = Organic Peroxides, FR = Flame Retardants, HS = Heat Stabilizers, L/MR = Lubricant/Mold Release, SA = Slip Agents, BI = Biocides, PL = Plasticisers, AS = Anti-Stats, AO = Anti-Oxidants, LS = Light Stabilizers 28

29 Plastic Additives Pro Forma Adjusted Non-GAAP Operating Profit Bridge Nine Months 2004 v Nine Months (Dollars in Millions) $ ($69.1) $33.2 $7.1 $ $28.0 ($38.0) ($9.0) ($1.2) Selling Price RM / Energy Volume / Mix Mfg Productivity Fx Cost Savings Other

30 Restoring Specialty Margins Portfolio Management Exit under performing / low potential businesses Focus on growth strategies for businesses with potential for above GDP growth Petroleum Additives Urethane Prepolymers Crop Protection Enhance portfolio of products in attractive niches Pursue organic growth by selective geographic expansion in Eastern Europe and Asia Restore Specialty margins through pricing and segmentation 30

31 Major Debt Maturities $600 million, 5-year unsecured revolving credit facility has been put in place Solid near-term liquidity and financial flexibility for debt repayment Mandatory Debt Payment Schedule ($ in millions ) Callable beginning $ Callable beginning 2008 $400 $350 $300 $400.0 $375.0 $250 $200 $150 $100 $50 $215.0* $225.0 $270.0 $ after 2012 A/R Securitization Crompton Bond Great Lakes Bond Note: Excludes debt included in Other that may be due during this period *Accounts receivable securitization balance at 6/30/05 31

32 Chemtura Outlook Synergy capture ahead of schedule: more than $10 million of synergies in 2005; $90 million in 2006 Headcount reductions of 600 by year end Focus on improving business process: supply chain planning, logistics rationalization, robust commercial processes to price for material margin and achieve operating margin targets of 15% Addressing rising raw material and energy prices with continued focused and selective price increases focus on margin over materials; address every element of the cost structure to identify savings 32

33 Chemtura Outlook On course to divest certain non-core assets, transactions expected in 2006 Merger integration largely complete: all functional and business groups staffed and organization working as one company Priority on reducing debt and interest expense Disciplined capital spending: approximately $150 million per year against depreciation and amortization of approximately $185 million 33

34 The Path Ahead Vision and Portfolio Optimization We will achieve our vision... World s best specialty chemicals company Portfolio optimization Seamless Business Teams... via 3 programs of excellence... Commercial excellence Operational excellence Functional excellence Information Systems... enabled by 3 key organizational enablers... Communications People development Performance enterprise management... and our values Safety Integrity Creativity Collaboration Accountability Winning 34